What the $1.2T Infrastructure Bill Means for CRE

By Erik Sherman | November 08, 2021 | Originally Posted on GlobeSt.com
The benefits of the new spending to real estate are largely indirect.

After more legislative drama than found in a West Wing rerun, the House passed the infrastructure bill, which now goes to President Biden’s desk for an expected signature.

The biggest story is not what it is, but what it isn’t. The original proposal was $2.6 trillion, according to a New York Times breakdown from August. The plan had included many items that wouldn’t make the cut: housing, schools, home- and community-based care, R&D and manufacturing, and more.

What passed was $1.2 trillion in spending. But it wasn’t all new, as $650 billion was extending previous spending. New spending of roughly $550 billion, mostly over five years, breaks out as follows, according to CNN.

Bloomberg News points to a number of funding sources for the bill, including unspent pandemic relief funds, assumptions of greater economic growth leading to increased tax revenue, states that ended unemployment benefits early and in doing so reduced the need for that federal money, spectrum auction sales, and more. There is disagreement over how much the measure will add to the deficit. The Congressional Budget Office expects the measure to add $256 billion over a decade.

Nothing in the bill directly speaks to real estate, but there are expectations that the industry would benefit indirectly. “While real estate is not included in the plan, real estate inherently needs strong infrastructure to be useful for tenants,” said a recent report from BlackRock.

For example, flood mitigation, new tax revenues to states, better transportation and communications, and improved power and water services are all positive for business in general, which would then presumably need more services from CRE.

One potential issue is that increased construction spending on infrastructure would increase demand for materials and labor that might drive up costs for CRE.

 

Are you looking to purchase or sell Orange County Commercial real estate? Do you need to lease Orange County commercial real estate? SVN | Vanguard provides industry-specific real estate services across a variety of asset classes throughout Southern California. Our market-specific commercial real estate expertise and experience are at the forefront of our practice. We advise clients to ensure informed decisions. Whether the property is in Orange, San Diego, Riverside, Los Angeles, or San Bernardino Counties, SVN | Vanguard offers our clients a competitive edge. The first step in our approach to every transaction is to listen. It is our job to understand client goals and how they relate to market conditions. We offer insight and guidance as we navigate each unique situation.

 

For more information, contact SVN Vanguard.



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